Reportable Arrangements:: Expansion of Listed Reportable Arrangements
Section 35 of the Tax Administration Act No. 28 of 2011 (“the TAA”) sets out the circumstances in which an arrangement would constitute a “reportable arrangement”. A “reportable arrangement” does not in itself give rise to a tax liability, but may give rise to the compilation of a cumbersome and onerous report for submission to SARS – the failure of which could give rise to significant penalties.
Section 35(1) of the TAA sets out legislative circumstances in terms of which an arrangement may be reportable. In addition, section 35(2) provides that an arrangement will be a reportable arrangement if it is listed by the Commissioner in a public notice.
In this regard, a Public Notice issued by the Commissioner on 3 February 2016 (“the Public Notice”) lists the various arrangements which will constitute reportable arrangements in terms of section 35(2) of the TAA. A copy of the Public Notice can be accessed here. It is important for taxpayers to take cognisance of the transactions listed in this notice as, unlike the legislative circumstances in terms of which an arrangement will constitute a reportable arrangement in terms of section 35(1) of the TAA (which are not applicable if the aggregate tax benefit of all parties to the transaction does not exceed R5 million), an arrangement listed in the Public Notice may constitute a reportable arrangement – regardless of the amount of any tax benefit involved.
It should be noted that a revised draft notice was issued by Acting Commissioner Kingon during February 2019 (“the Draft Notice”). The reportable arrangement provisions as set out in the Public Notice are not proposed to be amended in the Draft Notice. Rather, the Draft Notice proposes to add to the list of reportable arrangements certain arrangements entered into by closure rehabilitation companies or trusts contemplated in section 37A of the Income Tax Act No. 58 of 1962.